By Lisa Seachrist

Washington Editor

WASHINGTON — Geron Corp. completed a $15 million private placement with the sale of convertible preferred stock to investment funds managed by two institutional investors.

Rose Glen Capital Management L.P., of Bala Cynwyd, Pa., and The Citidel Group, of Chicago, financed the deal, which consists of $15 million worth of Series A convertible preferred stock. With completion of the deal, the Menlo Park, Calif.-based company said it has $50 million in cash.

"What we like to do is keep the balance sheet strong," said David Greenwood, chief financial officer at Geron. "This [financing] accomplishes that without diluting the stock tremendously."

Under terms of the agreement, preferred stock may be converted to common stock during the first nine months only after the market price of the common stock equals or exceeds $15 per share. The stock must be converted within three years after issuance. Following the first nine months, the cost of conversion will be based on the market price not to exceed $16.88 per share.

The company maintains the option to call the stock if the price of its shares exceeds or falls below certain undisclosed thresholds.

In addition to the private placement, Pharmacia & UpJohn, of Kalamazoo, Mich., purchased $4 million of Geron common stock at a premium.

Geron's stock (NASDAQ: GERN) closed at $12.563 up $0.75.

Greenwood said funds from the private placement would go toward general business purposes as the company develops technology based on chromosome ends called telomeres and the enzyme that puts them there, telomerase.

The aging of mortal cells is controlled by telomeres — a chain of repeated DNA at the end of chromosomes that shortens each time the cell divides. Telomerase serves as an "immortalizing" enzyme by adding telomere sequences to the end of chromosomes and preventing the inevitable shortening of telomeres during cell division. Telomerase is expressed in reproductive cells and helps to confer immortality to cancer cells.

Last weekend at the annual meeting of the American Association of Cancer Researchers, in New Orleans, Geron reported that normal human cells treated with telomerase continue to divide and maintain normal chromosome structure and function, showing no signs of transformation.

Greenwood said the work helps to allay fears that treatment with telomerase will spur a normal cell to become cancerous, and the findings open up the possibility of treating age-related diseases with telomerase.

In addition to clinical applications, the discovery could turn into an important research tool by allowing scientists to grow normal human cells in culture for long periods of time. Normal cells maintained in culture have a finite lifetime, but treatment with telomerase could extend that lifetime indefinitely. Permanent cell culture lines currently are all transformed cells.

"The cells don't transform into cancer," Greenwood said. "They are still dividing with a completely normal karyotype. This could be a great technology to use in the lab; it's definitely part of our development strategy."

Greenwood said chip companies have been in contact with the company about using the technology as a drug development tool. *

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